This smallcap is a monopoly biz, projected to grow 4 times in 5 years

It’s the only company in India and one of the few in the world that offers complete corrosion-protection solutions across various industry segments.

It counts Isro, Bhabha Atomic Research Centre and HAL among its clients and is also empanelled with global brand Rolls Royce and domestic airline GoAir.

The company’s stock has multiplied investor wealth nearly 10 times in last five years; it traded at Rs 53.55 on September 13, 2017 rising from Rs 5.61 on the same day in 2012.

Over the past five years, the company more than doubled its bottom line to Rs 50.20 crore in FY17 from Rs 23.42 crore in FY12. Net sales jumped from Rs 327.76 crore to Rs 414.76 crore.

At last count, Grauer & Weil (India), also known as Growel, had a market capitalisation of Rs 1,200 crore. The company is almost debt-free with some solid return ratios.



The return on net worth of the company grew to 18.28 per cent in FY17 from 17.99 per cent and 16.20 per cent in FY16 and FY15, respectively, and 16.30 per cent in 2011-12. Return on capital employed (RoCE) has risen to 22.89 per cent in FY17 from 14.59 per cent in FY13.

The stock has had a good run in recent time. So there might be some consolidation at this point. But the fundamentals remain intact, says Sageraj Bariya, Vice President for institutional sales at Kolkata-based brokerage East India Securities.

Growel has a few acres of surplus land, whose market value exceeds the company’s market capitalisation. This means at current valuation one is getting the stock virtually free. There is some amount of liquidity premium, which in turn is affecting the stock price, says Bariya.

Shareholding data available on BSE showed the promoters held a 69 per cent stake in the company at the end of June, 2017. Umesh Nandlal More, Niraj Kumar More, Premlata More and their family members are major promoters in the company.

As of June end, domestic and foreign institutional investors held a negligible 0.02 per cent stake in the company.

According to an earlier report by Delhi-based Wealth Discovery Securities, Growel is a one-stop shop for various surface protection solutions with an extensive dealer network. The brokerage said the company has very strong revenue visibility.

The company has 10 acres of surplus land in Mumbai's western suburb Kandivali, which has been developed into a mall, Growel’s 101. Analysts see it as a valuable asset with potential to generate significant cash flow. In FY17, the company management reported highest occupancy rate at 87 per cent.

If the current revenue and profitability growth (around 10-15 per cent) sustains given the current PE of 21, the stock should definitely touch the Rs 215 level in five years, said Rahul Agarwal, Director, Wealth Discovery Securities.

The projection is based on future estimates and relies on historical trends with an optimistic assumption on the sustainability of the growth momentum.

The trends may not hold good in the case of a fundamental change in the company’s position that affects growth negatively or if the industry goes through some drastic change.
Grauer & Weil missed analyst estimates for Rs 502 crore sales in FY17, which the company attributed to uncertain economic conditions because of the government’s demonetisation drive.

The company’s engineering segment division, located at Alandi, Pune, customised turnkey solutions for electroplating plants and their components, effluent and waste water treatment plants and other engineering products.

A cost rationalisation plan implemented last year showed good results and the division managed to book healthy profit.

The company had done surface finish work for Mangalyaan and Brahmos supersonic missiles. Recently it bagged an aerospace certification to supply to the global aerospace industry.

Growel caters to industries including auto, jewellery, hardware, plating on plastics, infrastructure, oil and gas and other heavy industries. Its products also find usage in nuclear, defence and space sectors and counts Bhabha Atomic Research Centre, HAL and Isro among its clientele.